Economic Logic, Too

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I discuss recent research in Economics and various events from an economic perspective, as the name of the blog indicates. I plan on adding posts approximately every workday, with some exceptions, for example when I travel.

Thursday, August 19, 2010

Do homosexuals save more or less than heterosexuals. As gays typically do not have children, one may think that they care less about the future and that this leads to lower savings. This is a prevalent intuition that even brought Hans-Herrmann Hoppe trouble over academic freedom with his administration. But is this idea true?

Brighita Negrusa and Sonia Oreffice claim it is true based on an analysis of the 2000 US census, showing that homosexuals couples accumulate significantly more retirement and social security savings. They save more than heterosexual co-habiting couples, who themselves save more than heterosexual married couples. The same can be concluded from mortgage to house value ratios.

Note that savings are not directly measured in those datasets. retirement and social security savings are inferred from retirement and social security income for retirees, and household wealth is inferred from the share of mortgage payments to the house value. And homosexual couples are also inferred by have to same gender adults in the same household. But even with all the measurement errors involved, the results are pretty clear and should at least give us to rethink some unfounded intuitions.

So why would homosexuals save more? The fact that they have fewer children, which would have accounted for the lack of altruistic bequests, may also mean that they cannot count on support from descendants. This is consistent with unmarried couples (who have less children) saving more than married couples. But why then do homosexual (unmarried, this is the year 2000) couples save more than unmarried heterosexual couples? The authors rule out discrimination on credit markets. An open question.